November 9, 2024

 

The S&P 500 rallied 4.7% this week for the biggest gain of the year. Investor sentiment was boosted by Donald Trump's decisive victory in the Presidential election, which alleviated concerns about a protracted period of uncertainty that could have accompanied a narrow result. Meanwhile, the US Aggregate Bond index rose 0.8%, gold declined 1.8%, and Bitcoin surged 11.0%. 

As expected, the Federal Reserve cut interest rates by 0.25%. The most interesting part of Chairman Powell's press conference was when he was asked if he would resign should President-elect Trump ask him to. He flatly said "no." Given that Trump may add Fed critics such as Vivek Ramaswamy and Judy Shelton to his administration, this could foreshadow a period of potentially tense interactions between the Trump Administration and Fed going forward. 

In economic news, the ISM Services Sector improved in October. Consumer Sentiment also improved to 73.0 from 70.5. Despite Fed easing, mortgage rates continued to rise to 6.8% this week, further denting housing affordability.  

 

 

 

Donald Trump Completes His Political Comeback 

 

 

Donald Trump completed one of the most stunning political comebacks in US history, becoming the 47th President of the United States. Similar to his win in 2016, the stock market reacted favorably. Small cap stocks, energy shares and financials rallied hugely, pushing the S&P 500 Index to its best post-Election Day performance ever. We correctly predicted Trump would win in last week's 5 Things, but everyone including us were surprised by the margin of victory.

The Republicans also have an edge in Congress, which sets the stage for sweeping legislative changes over the next two years. Trump Administration version 2.0 is expected to include a tighter border policy, which could boost inflation by limiting labor supply. Trump is also expected to dial back antitrust regulation, which will likely boost mergers and acquisitions. A boom in M&A will likely benefit certain financial firms, as well as Big Tech firms who can more nimbly buy innovation via their abundant cash flow. In the energy sector, Trump will likely provide more flexibility for energy exploration and production companies to expand fossil fuel production.  

 

 

 

Be Wary Of Looking At The Election Only Thru Rose Colored Glasses

 

 

Last week we emphasized how market returns have historically been bullish under both Republican and Democrat regimes. That's because neither party is perfect, and other factors outside of politics often guide market returns. One of them is valuations. 

When Trump won the 2016 election, the S&P 500 traded at 17 times projected earnings, while the yield on 10-year treasuries was around 2.5%. Eight years later, the S&P 500 is trading at 23 times projected earnings, which is 40% higher than the average since 2000. Meanwhile, the yield on 10-year treasuries is 4.3%. This sets up a tougher path for equities going forward compared to Trump's first year in office in 2017.

Moreover, one of Trump's signature campaign promises is to enact more stringent trade tariffs. While tariffs may sound good in theory, the reality is they have never worked well in practice. There is no precedent for tariffs being a sustainable path to enhance a nation's prosperity. The Smoot-Hawley Tariff Act was a disaster during the Great Depression, for example. The main bi-product of tariffs has historically been higher inflation. That's no bueno for Wall Street.         

 

 

 

Elon Musk's Net Worth Surges to $300 Billion 

 

 

Elon Musk donated $119 million to the Trump campaign. So far, it looks like a brilliant investment. After Trump's victory, his net worth skyrocketed by $50 billion, surpassing $300 billion for the first time in three years. Tesla shares rallied 28% this week. Even though Trump has not been historically friendly to green energy firms, investors are speculating Trump will reverse course and enact policies that boost Tesla and SpaceX. “I’m for electric cars,” Trump recently said at a rally in Atlanta. “I have to be, because Elon endorsed me very strongly.” As a sign for just how close Musk and Trump have become, Musk was pictured sitting next to Trump for much of election night. He was also reportedly included on a post-election conference call between president-elect Trump and Ukraine's President Zelensky.    

Musk is rumored to be a strong candidate for a presidential appointment, potentially heading a new "Department of Government Efficiency." The goal would be to review government spending and eliminate inefficient programs. How can Musk run six companies in different industries, and still have time to right size the federal budget? That remains to be seen. But if he is appointed and succeeds, it would probably mean trading short-term pain for long-term gain. A cut to government spending would weigh on economic growth early in President Trump's term, and potentially breed uncomfortable stagflation if his tariffs are also enacted. But in the long run, America needs to improve its productivity, and cutting government waste would help a lot.

 

 

 

MicroStrategy's Market Cap Leaps Above Ford Motor Company

 

 

The Ford Motor Company has been producing cars and building enterprise value since 1903. MicroStrategy (MSTR) is a technology company founded by Michael Saylor in 1989. MicroStrategy's market value eclipsed Ford's this week, driven by a significant rise in its stock price.

MSTR market cap increased over $10 billion in six stock trading sessions, reaching $22.4 billion. The jump was fueled by a rapid increase in Bitcoin prices, which boosted the company's strategic investments in Bitcoin. Saylor has turned his once ordinary tech firm into a Bitcoin compounding machine by refinancing debt and issuing equity to buy Bitcoin. This has made its balance sheet highly leveraged to Bitcoin prices. Saylor is one of the foremost advocates for Bitcoin, and he delivered a keynote address at this year's biggest Bitcoin conference. The speech was very interesting and encouraged us to take a position in MSTR within Silverlight's managed accounts. Trump's bullish stance on Bitcoin should be beneficial for MSTR and Bitcoin going forward.  

 

 

 

Man Is Overwhelmed Trying Color Blind Glasses For the First Time

 

 

Not everything is black and white. Wherever you stand politically, and however you may feel after this week, there are still beautiful things to observe in the world.

Kris Sipe is a 47-year old man who has been colorblind his entire life. In this video, he tries on color blind glasses for the first time. The video shows Kris becoming overwhelmed with emotion as he sees colors for the first time, describing the experience of seeing ordinary things as "amazing" and "overwhelming." Kris explains that with his regular sight, colors appear duller, and he never knew how bright and vibrant the world could be.

 

 

---

This material is not intended to be relied upon as a forecast, research or investment advice. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by Silverlight Asset Management LLC to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Silverlight Asset Management LLC, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.​​